Morgan Advanced Materials Plc · LSE:MGAM
Morgan Advanced Materials — H1 2016 Earnings Presentation
32 slides from Morgan Advanced Materials's earnings presentation, Jul 27, 2016
Slide 1: 2016 Interim Presentation
2016 Interim Presentation 27th July 2016 www.morganadvancedmaterials.com
Slide 2: Agenda
Agenda • Introduction and key highlights – Pete Raby • 2016 interim results – Peter Turner • Strategy and operational update – Pete Raby 2
Slide 3: Key highlights
Key highlights • A solid start to 2016 in a challenging market, in line with management expectations • No change to full year guidance • Strategy implementation on track 3
Slide 4: 2016 interim results
2016 interim results Peter Turner 4
Slide 5: Group performance summary
Group performance summary H1 20161 H1 20151 % change from H1 2015 At constant As reported currency £m £m % % Revenue 475.4 469.2 1.3% -2.4% Group underlying operating profit 2 55.1 61.1 -9.8% -13.9% Group underlying operating profit margin % 2 11.6% 13.0% Cash flow from operations 47.5 59.2 -19.8% U
Slide 6: Divisional performance
Divisional performance Revenue (£m) EBITA (£m) EBITA margin (%) H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 Thermal Ceramics 193.9 186.0 25.6 26.6 13.2% 14.3% Molten Metal Systems 20.6 20.6 2.9 2.6 14.1% 12.6% Thermal Products 214.5 206.6 28.5 29.2 13.3% 14.1% Electrical Carbon 75.6 78.1 10.3 12
Slide 7: Cash flow summary
Cash flow summary H1 2016 H1 2015 £m £m Cash from trading* 70.7 74.9 • Working capital outflow Change in working capital (16.3) (9.0) following strong Change in provisions (6.9) (6.7) performance in H2 2015 Cash flow from operations 47.5 59.2 Net capital expenditure (17.7) (31.8) • Capital expenditu
Slide 8: Pensions update
Pensions update Deficit movement since 31 Dec 2015 (£m) Annual cash contributions Deficit at 31 December 2015 (205) 2016 Foreign exchange (10) Funded scheme contributions £20m Return on assets 30 - UK £10m Contributions (net of service costs) 9 - USA £8m Settlements 4 - Rest of World £2m Change in l
Slide 9: Financial summary
Financial summary • H1 performance in line with expectations • Group underlying operating profit margin at 11.6% • Underlying EPS at 10.5p • Interim dividend maintained at 4.0p 9
Slide 10: Strategy and operational update
Strategy and operational update Pete Raby 10
Slide 11: Thermal Ceramics: performance summary
Thermal Ceramics: performance summary £m H1 2016 H1 2015 Reported Constant currency change % change % Revenue 193.9 186.0 4.2% 0.6% EBITA 25.6 26.6 -3.8% EBITA margin % 13.2% 14.3% Performance commentary Strategic focus Main markets • Japan growing strongly • Growth opportunities: • Industrial • Eur
Slide 12: Molten Metal Systems: performance summary
Molten Metal Systems: performance summary £m H1 2016 H1 2015 Reported Constant currency change % change % Revenue 20.6 20.6 0.0% -1.4% EBITA 2.9 2.6 11.5% EBITA margin % 14.1% 12.6% Performance commentary Strategic focus Main markets • Modest revenue decline due to • Operational improvements: • Auto
Slide 13: Electrical Carbon: performance summary
Electrical Carbon: performance summary £m H1 2016 H1 2015 Reported Constant currency change % change % Revenue 75.6 78.1 -3.2% -6.0% EBITA 10.3 12.1 -14.9% EBITA margin % 13.6% 15.5% Performance commentary Strategic focus Main markets • Market decline in North America • Growth opportunities: • Rail
Slide 14: Seals and Bearings: performance summary
Seals and Bearings: performance summary £m H1 2016 H1 2015 Reported Constant currency change % change % Revenue 47.6 47.7 -0.2% -4.4% EBITA 6.6 6.9 -4.3% EBITA margin % 13.9% 14.5% Performance commentary Strategic focus Main markets • Constant currency declines • Growth opportunities: • Oil and gas
Slide 15: Technical Ceramics: performance summary
Technical Ceramics: performance summary £m H1 2016 H1 2015 Reported Constant currency change % change % Revenue 121.8 120.2 1.3% -3.6% EBITA 12.8 15.0 -14.7% EBITA margin % 10.5% 12.5% Performance commentary Strategic focus Main markets • Revenue decline largely driven • Growth opportunities: • Aero
Slide 16: Composites and Defence Systems: performance summary
Composites and Defence Systems: performance summary £m H1 2016 H1 2015 Reported Constant currency change % change % Revenue 15.9 16.6 -4.2% -4.2% EBITA 1.1 0.4 EBITA margin % 6.9% 2.4% Performance commentary Strategic focus Main markets • Defence markets remain • Growth opportunities: • Military veh
Slide 17: Reliable problem solving
Our vision is to be renowned for world-class material science, application engineering and customer focus Material • Scalable global science businesses • In growing markets Reliable • Where technical problem differentiation is solving valued Ethically and safely Application engineering Customer focu
Slide 18: Six execution priorities
Six execution priorities 1. Move to a global structure 2. Extend our technology leadership 3. Improve operational execution 4. Drive sales effectiveness and market focus 5. Increase investment in people management and development 6. Simplify the business 18
Slide 19: Extend our technology leadership by increasing R&D investment
Extend our technology leadership by increasing 2 R&D investment R&D as a percentage of sales, 2012-2016 H1 • Investment at 2.9% of sales in H1 2.9% • Fibre investment: 2.8% • Developing new chemistries for 2.3% more extreme environments 2.1% • Prioritising projects for key 1.9% business growth oppor
Slide 20: Two new Centres of Excellence
Two new Centres of Excellence 2 Location Priorities • Applications for joining in highly • Hayward, California with our corrosive environments brazed alloys business and one • Complex joint configurations 1. Metals and of our ceramic joining and • Bio-compatible applications Joining metallisation fa
Slide 21: Improve operational execution
Improve operational execution 3 Capital allocation and productivity Delivery Quality Efficiency Thermal Ceramics Global procurement, manufacturing strategy and plant utilisation Molten Metal Systems Global sourcing and streamlined global manufacturing strategy Electrical Carbon Focus on increasing u
Slide 22: Driving sales effectiveness and market focus
Driving sales effectiveness and market focus 4 Group wide Pilot projects Growth sales priorities capabilities Defining the Re-designing our sales Defining plans and capabilities we need, processes and sales adding resources to assessing capability performance growth opportunities gaps and then closi
Slide 23: Increasing investment in people management and developing future leaders
Increasing investment in people management and 5 developing Morgan's future leaders Developing our performance management approach for senior 1 leaders and training on it We have Piloting the talent development approach for our materials 2 scientists defined our talent priorities for the next 18 mon
Slide 24: Summary
Summary • A solid set of results in challenging market conditions • Strategy implementation on track • We continue to take a cautious view of market conditions, focusing on increasing our efficiency and reinvesting in the business • Guidance for the full year unchanged 24
Slide 25: Appendix
Appendix MMorgan c Advenced Materials:
Slide 26: We have implemented a global structure
We have implemented a global structure CEO Thermal Products Carbon and Technical Composites and • Structure implemented 1 Division Ceramics Division Defence Systems March 2016 Ian Robb Alain Kirchmeyer Duncan Eldridge • Six product-based global business units Thermal Ceramics Electrical Carbon • Del
Slide 27: End market mix chart
End market mix chart m Energy = Petrochemical and industrial m Electronics and telecomms = Transportation = Security and defence Healthcare MMorgan E Advanced Materials
Slide 28: Reported statutory figures
Reported statutory figures Results before Specific Total specific adjusting adjusting items items H1 2016 H1 2016 H1 2016 £m £m £m Revenue 475.4 475.4 Operating costs before restructuring costs, other one-off items and amortisation of intangible assets (418.8) - (418.8) Profit from operations before
Slide 29: Key exchange rates
Key exchange rates H1 2016 FY 2015 H1 2015 Closing Average Closing Average Closing Average GBP to: rate rate rate rate rate rate USD 1.33 1.43 1.47 1.53 1.57 1.52 EUR 1.20 1.28 1.36 1.38 1.41 1.37 Key exchange rate sensitivities on H1 results Revenue Group EBITA Increase in H1 revenue/Group EBITA if
Slide 30: Underlying EPS
Underlying EPS H1 2016 H1 2015 £m £m Basic earnings from continuing operations 29.0 32.4 Amortisation 3.3 3.6 Specific adjusting items (2.3) 0.0 Underlying earnings 30.0 36.0 Weighted average number of shares in the period 284.8m 285.1m Underlying earnings per share from continuing 10.5p 12.6p opera
Slide 31: Divisional performance FY 2015
Divisional performance FY 2015 Revenue (£m) EBITA (£m) EBITA Margin % FY 2015 FY 2015 FY 2015 Thermal Ceramics 372.4 55.2 14.8% Molten Metal Systems 39.7 5.3 13.4% Thermal Products 412.1 60.5 14.7% Electrical Carbon 145.6 19.3 13.3% Seals and Bearings 88.6 9.9 11.2% Technical Ceramics 237.8 26.1 11.
Slide 32: 2016 Interim Presentation
2016 Interim Presentation 27th July 2016 www.morganadvancedmaterials.com
Morgan Advanced Materials — H1 2016 Earnings Presentation on 6ix